Lawmakers asked to involve business in housing policies

Outside a well-known restaurant a few blocks from the White House, a homeless man sits with his head down, staring into an empty hat on the sidewalk before him. Inside, over a warm breakfast of eggs and toast, housing advocates are talking about the need for a national housing program. Nudged into the limelight by the growing population of street people, requests for a federal housing policy are finally mustering congressional attention.

Homelessness might not be a ``housing'' problem, but it has ``raised public awareness that housing itself is an issue,'' says Diane Disney, a professor of business at Brandeis University, where she has done extensive research on housing issues.

Soaring real estate costs - particularly in the Northeast and on the West Coast - have shrunk the number of homeowners in the United States and put more pressure on the rental market. This has, in turn, contributed to rising rents and taken more units away from low-income tenants.

This week the Senate Banking, Housing, and Urban Affairs Subcommittee is holding hearings to gather ideas on what a national housing policy should include. The final program, sponsored by Sens. Alan Cranston (D) of California and Alfonse D'Amato (R) of New York will be introduced in July, a subcommittee aide says.

In a recommendation to the subcommittee Tuesday, James Rouse, co-chairman of the National Housing Task Force, estimated that a minimum housing program would cost the government about $3billion a year.

But other groups, pointing to problems in all areas of the housing market, are calling for more than a minimum policy, one that involves local and federal governments as well as private-sector support.

Some people would, in fact, like to see more initiatives by the private sector and less government involvement. David Schwartz, chairman of the National Housing Institute, a nonprofit research group, advocates extensive employer involvement in housing assistance, through tax-advantaged personnel benefits, and employee home-ownership plans similar to stock ownership plans.

In a proposal the institute submitted to Congress, Mr. Schwartz, who is also a New Jersey state assemblyman, recommends such assistance as:

Interest-rate buy-downs, or mortgage interest rate subsidies, which several businesses, including the Colgate-Palmolive Company, offer their workers as part of the employee benefits package.

A national lease-purchase home-ownership program, whereby builders would receive low-interest loans from the government, and they in turn would give families two or three years to pay off the down payments (such a program exists in New Jersey).

Individual housing accounts, similar to individual retirement accounts, which would allow tax-deferred saving for buying a home.

Other proposals include employee home-ownership plans similar to stock ownership arrangements, and a national housing investment corporation. This, Schwartz says, would make the government a partner in a diversified portfolio of housing assets.

James Christian, chief economist at the United States League of Savings Institutions, would like to see the government encourage saving by lifting its restrictions - imposed by the 1986 Tax Reform Act - on the use of 401(k) plans toward down payments. He believes that ``people already go into debt too easily.''

The issue is not merely one of low- or no-income housing, Schwartz says. The problem affects middle-income America as well, and more severely on the East and West Coasts, he says.

The National Housing Institute, along with the National Association of Realtors, the Mortgage Bankers Association, and the National Association of Home Builders, is asking Congress to consider ways of making housing more affordable and available for people in this group. Such measures, they say, will also help other programs aimed at curbing homelessness and easing the shortage of inner-city low-income housing.

A recent report prepared by the Joint Center for Housing Studies of Harvard University shows that rising home prices have pushed more people out of the housing market and kept them renting their homes or apartments. This has put upward pressure on rents and made housing even less affordable for low-income renters, the report finds.

When typical middle-Americans were ready to buy a piece of property 20 years ago, they could expect to spend about 16 percent of their annual salary on house payments. Home buyers tended to be married, with a median age of 32, according to the US League.

Today's buyers, on the other hand, are about five years older, and more often divorced or single. This, combined with the sizable down payments required for today's more expensive homes, and low savings rates, has contributed to the declining number of homeowners, says Glenn Crellin, vice-president of economics and research at the National Association of Realtors.

Now, the average homeowner must part with about one-fourth of his income to buy a median-priced home, which today hovers near $95,000, according to the US League. In the hot real estate markets, median home prices range from $110,000 to $169,300.

Because salaries in these regions have not kept pace with home appreciation, monthly payments for these houses can drain over 40 percent of that income.

A US League comparison of the change in median house prices from state to state shows that homes in the San Francisco Bay Area, for example, have appreciated 135 percent in 10 years, while salaries have gone up only 87 percent.

A falling rate of home ownership since 1980 - to 64.2 percent, after rising continuously for 35 years - means that 1.5 million fewer households own homes today.

More frequent mortgage defaults and foreclosures, especially in economically depressed markets, have caused both mortgage insurers and savings institutions to toughen their underwriting standards, making it harder to obtain a mortgage, Mr. Christian says.

Yet, ``judging by what a fairly large number of households pay for rent, a lot more could make the necessary mortgage payments,'' he continues. Not having saved enough to make the hefty down payments required, these people are not able to pull themselves out of the renting circuit.

This, as the Harvard study notes, has led to a greater demand for rental housing by young people, low- and middle-income families with children, and single-parent households.

As a consequence, the rent burden for young single-parent families with children has gone to 58.4 percent of income, from about 35 percent in 1974. Housing quality and availability have declined steadily for these groups, the report continues.

``Over the last couple of years, we have had to fight for the bare maintenance of [housing-related] programs that have done good work in the past,'' says Mr. Crellin of the Realtors Association.

Others point out the difficulty of trying to nationalize something as regionally responsive as local housing markets.

``It would be very hard to even define what a national housing policy will be,'' Ms. Disney at Brandeis University says.